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The BRT originally consisted of 25 trusts, the beneficiaries
of which were all individuals. Most of the beneficiaries of BRT
were members of Kanter's family. As shown by the BRT agreement,
Kanter's 1978 renunciation, and the Forms K-1 attached to the
1988, 1987, and 1988 BRT returns, sometime after Kanter
purportedly renounced his interest in BRT and during or before
1987, 60 new trust beneficiaries (the JSK trusts) were added to
the 25 trusts of BRT. Although Kanter purportedly renounced his
interest in BRT in 1978, including his power of appointment, he
nonetheless added 60 new trust beneficiaries to BRT. According
to the BRT agreement, only Kanter, through exercise of his power
of appointment, could have created these new trust beneficiaries.
Because the power of appointment vested in him the power to add
new beneficiaries other than after-born children, the power of
appointment was a power of disposition. See sec. 1.674(a)-1,
Income Tax Regs. Because we regard Kanter as the true grantor,
his possession of the power of appointment (a power of
disposition) makes the trust income taxable to him in 1986 and
1987.
Weisgal, the named trustee, had no beneficial interest in
BRT. Since Weisgal had no beneficial interest in BRT, he is a
nonadverse party. See sec. 672. Thus, even if the 60 new trust
beneficiaries were added pursuant to a power held by Weisgal, a
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